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Monday, August 4, 2014

(LEGAL) Performance Royalties: The State Of Play


There is much afoot these days in the world of copyrights and performance rights and royalties. Any radio station owner knows about the license fees collected by ASCAP, BMI, and SESAC, which pay royalties to composers and publishers. Less familiar are royalties collected by performers and the recording industry. For musical recordings, radio stations pay SoundExchange when streaming music over the Internet, but not for over-the-air broadcasts. The logic has been that the recording industry already reaps a huge benefit from having its records played over the air. In fact, traditionally the money stream has flowed in the opposite direction, with radio stations, DJs, and PDs being paid to play recordings on the air. There?s even a name for it: payola.

Performance Tax
The term ?performance tax? is used for the perennial attempt to impose, through legislation, a requirement that radio stations pay royalties for over the-air broadcasts of musical recordings. Through the years these attempts have been thwarted, and even now there are already 224 U.S. representatives co-sponsoring a resolution against it.

But this year there appears to be additional momentum for the performance tax. The House Subcommittee on Intellectual Property held hearings on music licensing, and Rep. Jerrold Nadler, ranking member of the subcommittee, said, ?I am developing legislation to address the various problems in existing law in one unified bill.? He went on to say that the most glaring problem is that ?rights holders of sound recordings receive absolutely no compensation when their music is played over the air on terrestrial, meaning AM/FM, radio.?

With an introduction like that, it sounds more like a witch hunt than a hearing. However, there appears to be a new tactic, namely a top-to bottom review of the copyright laws (rather than just the singular issue of radio paying to air recordings). Although broadcasters still appear to have the votes in Congress, others quietly worry that a radio performance fee is just a matter of time.

Songwriter Equity Act
Even before the Congressional hearings in June, there was a House bill attracting attention ? the Songwriter Equity Act. This legislation charges the Copyright Royalty Board with setting fair songwriter (ASCAP and BMI) royalty rates for digital music services by broadening the pool of evidence that rate courts like the CRB may examine. At first, this sounds like a money grab by composers and publishers against Internet streamers like Pandora, but it could open the door for the CRB to adjust any perceived inequities between songwriter and artist rates on the backs of broadcasters.

Although radio stations do not currently have to pay performance fees for recordings broadcast over the airwaves, they do pay for simulcasts of the station?s programming over the Internet. This goes back to passage of the Digital Millennium Copyright Act in 1998, when there was debate over the royalty radio broadcasters should pay for streaming their content. The DCMA provided that any retransmission of a broadcast signal was exempt from the sound recording copyright royalty, provided that the broadcast is not ?retransmitted more than a radius of 150 miles from the site of the radio broadcast transmitter.?

Broadcasters argued that the exemption extended to retransmissions over the Internet. The recording industry argued that ?transmission? must be a terrestrial broadcast (like a translator) and cannot include streams, which have a global reach well beyond the 150-mile radius. In its final ruling, the Copyright Office determined that Internet simulcasts are not exempt from copyright liability.

However, this year a radio group filed a declaratory judgment complaint in federal court, claiming they use a technology called ?geofencing? to restrict Internet retransmissions of their broadcast signals to a 150-mile radius, and therefore they should be exempt from streaming royalties. A favorable ruling would provide precedent for other stations that seek only a local audience for their Internet streams, but could impact aggregators like iHeartRadio because some stations would then want to restrict the radius of their streams.

What can you do about the increased pressure being applied for new licensing fees? Station owners should reach out their counsel and the NAB, but also to the Radio Music Licensing Committee and to their state broadcast associations for information and ways to have their voices heard. Radio is a vital medium that serves the public in ways no other service does. Lawmakers need to be constantly reminded of that. And as broadcasters increasingly look to stream their content on the Internet and streaming companies like Pandora are moved to purchase radio stations to become more like broadcasters for copyright reasons, the lines will continue to blur. So it?s up to the radio industry to keep the message clear.

Frank Montero is the managing partner of the Washington, DC law firm of Fletcher, Heald & Hildreth and can be reached at

(8/1/2014 10:57:18 AM)
"Lawmakers need to be constantly reminded of that'.
Let's face it - money wins in Washington and in most other places too. But especially in Washington. So the money grab by the labels is being preceded by a money grab by lobbyist and lawmakers. So to win, this is going to cost us a lot of money for lobbyists. The only reminder our lawmakers need is a check.

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